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1. What is the purpose of the Global Incentives for Trading (GIFT) programme?
The Global Incentives for Trading (GIFT) programme, launched in collaboration with the Malaysia Petroleum Resources Corporation (MPRC), is aimed at positioning Malaysia as a regional trading and storage hub for oil and gas.
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2. What is the Labuan international commodity trading business ?
A Labuan international commodity trading business is the trading of physical and related derivatives of petroleum and petroleum-related products including liquefied natural gas (LNG). Labuan international commodity trading companies use Malaysia as their international trading base to undertake international commodity trading business in Labuan IBFC.
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3. How to apply and what are the conditions for licence under the GIFT programme?
The Labuan international commodity trading company (LITC) must have sufficient capital/working funds that commensurate or are in accordance with its operations and activities. Upon licensing, the LITC must ensure the following:
- Indicate clearly on its letterhead, stationery and other documents including signage containing its name that it is licensed as a “Labuan International Commodity Trading Company” under the Labuan Financial Services and Securities Act 2010, together with its licence number
- The business is conducted with proper corporate governance and has a risk management framework in place; and
- Is expected to comply with other requirements of the Labuan Companies Act 1990, the Labuan Financial Services and Securities Act 2010 and other relevant laws, whichever is applicable.
- Indicate clearly on its letterhead, stationery and other documents including signage containing its name that it is licensed as a “Labuan International Commodity Trading Company” under the Labuan Financial Services and Securities Act 2010, together with its licence number
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4. What are the post licensing requirements for an LITC ?
LITC must comply with the following conditions after the granting of its licence and commencement of its business :
- Achieve annual minimum turnover of USD50 million;
- Incur minimum annual business spending of RM3 million payable to Malaysian residents in Malaysian Ringgit; and
- Employ at least three professional traders that fulfill the following requirements:
- The Principal officer or any person performing a senior management function who would be principally accountable for:
- making decisions that affect the whole, or a substantial part of the LITC business;
- implementing and enforcing policies and strategies approved by the LITC’s Board of Directors including Head of Department or any equivalent designated person; or
- internal controls and processes of the LITC.
- These professional traders shall be involved in any one of the following areas:
- Trading;
- Risk Management;
- Procurement; or
- Sales & Marketing.
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5. What are the permitted activities under the GIFT programme ?
The permitted activities include buying, selling and /or broking of physical and related derivative instrument of petroleum and petroleum-related products including liquefied natural gas (LNG).
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6. Can the LITC operate out of Labuan but in Malaysia?
The LITC is allowed to establish its operational office(s) and operate anywhere in Malaysia but it must maintain its registered office in Labuan, which is the office of the Labuan trust company.
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7. What is the Corporate Tax for LITC ?
The rate of tax imposed is 3% of audited net profits.
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8. Are there any forms of indirect taxes applicable on an LITC?
Labuan is a duty-free zone, hence there are no indirect taxes.
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9. What are the fees payable by LITCs in Labuan IBFC?
The fees payable are illustrated in the table below:Type of FeesAmountProcessing FeeRM1,000USD350Annual FeeRM40,000USD13,000All licensees are required to pay to Labuan FSA annual licence fees on or before 15 January of each year.
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10. Effective 1 March 2018, Labuan company that wants to trade in Non-Petroleum Commodities are no longer required to be licensed under the GIFT programme. Is this understanding correct?
Post 1 March 2018, new Labuan companies that intend to trade in Non-Petroleum commodities are not required to be part of the GIFT programme.
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11. Existing Non-Petroleum have until October 2018 to comply to the revised Guidelines. Is there any transition period after that ?
The transition period has already been given which started from the issuance date of 8 March 2018 and will end on 30 September 2018. Henceforth, the revised Guidelines takes effect beginning 1st October 2018.
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12. For the transitioned Non-Petroleum LITCs, which Guidelines are they required to follow? The old or the revised Guidelines?
Non-Petroleum LITCs granted transition arrangements by LFSA to retain their licence are required to comply with the revised Guidelines’ requirements.
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13. Are Non-Petroleum LITCs required to employ three officers performing senior management functions?
The revised Guidelines have expanded the parameter in recognising Professional Traders which include Principal Officer and officers performing senior management functions in specified areas such as risk management, procurement and etc.
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14. Can Non-Petroleum LITCs surrender its licence prior to the specified transition date?
The revised Guidelines take effect on 1st October 2018 and Non-Petroleum LITCs have been granted transition arrangement according to the specified dates. Notwithstanding, these companies have the option to opt out from the GIFT programme by surrendering their LITC licences prior to the specified dates.
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15. If we are a Petroleum LITC, and we want to add into our portfolio Non-petroleum commodities. Is this allowable?
• The Non-Petroleum has been carved out from the GIFT programme in line with the issuance of the Revised Guidelines. Any trading of Non-petroleum shall be undertaken under a separate Labuan structure.
• Similarly, for transitioned Non-Petroleum LITC that want to expand its commodities portfolio to include Petroleum commodities, a separate Labuan company would need to be registered and licensed under the GIFT programme to undertake the trading of Petroleum and Petroleum-related commodities.
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16. If a LITC has just been licensed in November/ December 2018, does it need to meet the annual quantitative requirements of Turnover, Domestic Spending and Professional Traders?
The policy expectation on the compliance to the Guidelines’ would be made on practical basis i.e. a Petroleum or Petroleum related LITC will be assessed against a full’s year’s operation as regards the annual quantitative requirements.
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17. What will happen should LITCs are unable to meet the minimum threshold requirement of USD50 million for annual turnover?
LITCs that are not able to achieve the minimum requirement of USD50 million for turnover would be treated as non-compliance to the Guidelines and be dealt with accordingly under the Labuan Financial Services and Securities Act 2010. LITCs are advised to engage with Labuan FSA early should they foresee that they are not able to meet any of the quantitative requirements.
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18. Is the role of a Principal Officer (PO) can be considered as Professional Trader?
The definition of Professional Traders has been expanded under the revised Guidelines in which Principal Officer and any officer performing senior managerial functions in specified areas are now recognised as Professional Traders.
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19. Effective 1st October 2018, do existing Non-Petroleum LITCs required to convert their operational offices in other places outside Labuan in Malaysia into Marketing office?
Existing Non-Petroleum LITCs have been granted transition arrangement according to the specified dates from the GIFT programme and hence may maintain the operational office up to that date.
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20. As per Para. 7.6 of the revised Guidelines, can the LITC undertake other business apart from the trading Petroleum and Petroleum-Related commodities?
The LITC is only allowed to undertake the trading of Petroleum and Petroleum-Related commodities as deliberated under Para 5.1. Para. 7.6 is to cater for LITCs that are undertaking business that are ancillary to the trading of Petroleum and Petroleum-Related commodities such as leasing, trading, consultancy etc.
